"Then right click on your source folder and select properties, then in the Native Library option add a path to the lwjgl folder."
Native Library option doesnt exist or at least I cant find it by double clicking the source folder!
im using eclipse 3.2.2
I created the source folder by right clicking on the project the selecting New->Source Folder
If its a source folder, then when you right click and select properties there are 4 options to choose from on the left hand side. The bottom option is Native Library.
If you have just created a normal folder then the Native Library option is not available and i am only shown one option which is Info.
Could this be your problem?